Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
One of crypto’s key tenets is sharing a network’s gains with its users. The rise of airdrops, where users receive ‘free’ tokens as rewards, exemplifies this trend.
Uniswap, crypto’s most widely used decentralised exchange, was one of the first protocols to launch a token this way in September 2020.
Last Friday, a new proposal was released to upgrade Uniswap’s (UNI) Protocol Governance. The change would enable a fee-sharing mechanism for token holders.
The proposal sparked a violent +75% move within an hour for the Uniswap token.
Uniswap makes revenue by taking a small cut of every trade on its exchange. Currently, the fees are given to liquidity providers.
This system promotes token holders to provide liquidity to the market, thereby reducing volatility and pulling in larger market players.
The change will result in Uniswap sharing revenue with token holders who have staked and delegated their tokens. Uniswap previously also hinted at the possibility they will turn on a 0.05 per cent protocol fee in the future. This would enable stakers to generate yield without impacting liquidity providers.
In the past, proposals to enable fee sharing have sparked apprehension because Uniswap is based in the US. The SEC (U.S. Securities and Exchange Commission) has had a strong stance on projects sharing income, akin to dividends. They assert this meets the criteria for a security based on the Howey Test.
This has prevented US-based projects from sharing revenues or giving any other financial benefits to token holders, including airdrops. Due to this, token holders did not want the SEC to set its sights on their token.
Last Friday, the SEC faced a blow of its own, with Kraken, a centralised crypto exchange, filing a motion to dismiss the SEC’s lawsuit against them. Kraken claims the SEC retaliated against them for their comments made in a congressional hearing last May.
The exchange argued that the SEC’s regulation-by-enforcement strategy against crypto companies was not effective at protecting consumers.
Kraken also suggested the US Congress should limit the SEC’s jurisdiction with other agencies taking its place. The day after the hearing, the SEC alerted Kraken they were suing.
Both centralised and decentralised crypto forces are pushing back against the SEC’s far-reaching scrutiny. Will this be the beginning of the end for the SEC Chairman, Gary Gensler, and his reign as crypto’s biggest antagonist?